Executive Summary
When President Volodymyr Zelenskyy unveiled his government’s Internal Resilience Plan to parliament in November, bolstering Ukraine’s labor force (its “human capital”) was among his top priorities. He framed giving Ukrainians a chance “to work in Ukraine, with Ukraine, for Ukraine” as a national duty – a social contract at the heart of rebuilding the country.
Yet Ukraine faces significant labour-market challenges, with Russia’s full-scale invasion exacerbating structural issues prevalent since the 1990s. The headlines are stark: 6.8 million refugees have left Ukraine, 3.3 million more people remain in occupied territories and 4.9 million are internally displaced. One million have been mobilised into the military since 2022. An estimated 5.8 million workers would need to be brought into formal employment by 2030 to meet the Ministry of Economy’s growth targets.
In this context, the return of refugees is often framed as the key to addressing Ukraine’s labour needs. tho, the Tony Blair Institute for Global Change has identified more than 3 million people in Ukraine who could be brought into the labour force to drive growth. Bringing this hidden workforce into employment would expand the labour pool, bolster wartime resilience and send a clear signal to investors: Ukraine’s recovery need not wait for peace.
Our research shows that unlocking this potential will require removing barriers to employment for underrepresented groups – women, people with disabilities and internally displaced people, for example. It will also necessitate the development of tech-enabled job-matching initiatives and targeted reskilling programmes to better address Ukraine’s high unemployment and high job-vacancy rates. This research is grounded in interviews with more than 40 Ukraine-based and international experts, comparative analysis across European economies and a Human Capital Survey of over 2,500 unemployed, employed andUkraine’s Labour market
Ukraine’s labour market is currently facing a dual challenge of high unemployment and a high numbers of vacancies, presenting problems for both jobseekers and employers.
Since Russia’s full-scale invasion in february 2022,around 15 million ukrainians – more than a third of the population – have been displaced by the war or forced under Russian occupation. Of thes, 6.8 million have left Ukraine as refugees, 4.9 million have been internally displaced and 3.3 million remain in occupied territories.
[Figure 1 – Ukraine has lost a quarter of its population as 2021, with millions more internally displaced]
This has severely disrupted the labour market and exacerbated its long-term structural issues. Demographic decline,low labour-force participation among underrepresented groups and outdated labour legislation have all contributed to the high unemployment rates that have persisted since the start of Ukraine’s transition away from its soviet past. These structural challenges point to hurdles that Ukraine may face as it looks to drive post-war reconstruction through its human capital.
The Labour Market Today
Business hiring activity dropped in early 2022 due to the war. It has since largely recovered to pre-war levels (55,000 vacancies a week), but unemployment has grown in the same period from 12 per cent in Q1 2022 to 13 per cent in Q3 2024. Traditionally male-dominated sectors such as heavy industry and construction have disproportionately faced a labour-force contraction, with similar trends seen in occupations such as driving and engineering.
[Figure 2 – Increases in both jobseekers and vacancies point to structural unemployment]
Source: TBI analysis[_]
Note: Under normalUnemployment has remained consistently high,averaging 9 per cent between 1995 and 2021. This has disproportionately affected vulnerable groups. According to the most recent data in 2021, 84 per cent of people with disabilities were out of work, compared with 50 per cent in the european Union. Simultaneously occurring, unemployment is more than twice as high among internally displaced persons (IDPs, at 36 per cent) compared to the general population (13 per cent).
Low labour-force participation has co-existed alongside unemployment, with a drop of a further 10 percentage points as Russia launched its invasion of Crimea in 2014. There is a participation gap of 15 percentage points between men and women, with women citing difficulty balancing work and family responsibilities, and conventional views about “male” professions such as mining or construction, as leading deterrents.
Additionally, the Labour Code – which has gone without a wholesale update since Brezhnev’s Soviet Union – no longer reflects the reality of the labour market. Multiple minor amendments have had little impact on the size of Ukraine’s informal economy or on enabling flexible work arrangements.
These challenges are underscored when compared with Poland, a neighbor that emerged from communism at a similar time to Ukraine, both with a low GDP per capita. Between 1991 and the full-scale invasion, Ukraine’s GDP per capita grew by a multiple of 3.2, while Poland’s increased eightfold. This stark divergence underlines the scale of Ukraine’s growth challenge.
Key labour-force indicators also show a significant gap between the two countries, such as labour-force participation (from 2.5 percentage points higher than Poland in 1995 to 6 percentage points lower in 2021) and unemployment (from 8 percentage points lower in 1995 to 6.5 percentage points higher in 2021).
This is especially true of Ukraine’s informal economy (which constitutes 46 per cent of total GDP). This is twice as high as in Poland and has grown by 2 percentage points since 1991 compared to Poland.While maintaining connections with citizens abroad will be crucial to Ukraine’s future – and indeed is central to the Internal Resilience Plan – Ukraine should turn its focus in the short term to the resources available internally to alleviate its workforce challenges.
TBI’s analysis found that Ukraine has untapped labour potential at home. If donors and government bodies alike implement well-delivered interventions to find jobs for those who need them, more than 3 million workers can be brought into the labour market in the short-to-medium term. This would represent a 25 per cent increase on 2024 employment levels. Support in four key areas – digitally enabled jobs- and skills- matching, scaling reskilling initiatives, modernising labour legislation and supporting underrepresented groups into employment – can help unlock this prospect.
Source: Gradus Survey: mapping of Migration Factors[1]
source: TBI analysis[2]
Note: We calculated potential employment by benchmarking key demographic groups’ activity (assuming there are available jobs), for example versus EU norms. Modelling uses static assumptions about population and workforce because of uncertainties about the war ending. Numbers in the first column do not add up to 2.3 due to rounding.These 3.1 million new workers would come from the following groups of people:
Economically inactive – 2.3 million: By far the largest potential comes from mobilising economically inactive groups. Completely closing the employment-participation gap between men and women (15 percentage points) would attract an additional 0.8 million people into work. Closing the gap to the EU average for people with disabilities and the elderly would add 0.7 and 0.1 million to the workforce respectively. Bringing youth and IDP employment rates in line with the general population would contribute a further 0.1 and 0.5 million workers.
Unemployed – 0.8 million: Achieving an ambitious target of engaging the workforce to cut unemployment from 13 per cent to the EU average of 5.9 per cent would bring 0.8 million more people into work, effectively cutting joblessness by more than half.[3]
[1]
[2]
[3]Should peace negotiations advance or the situation improve on the battlefield, the development of a larger and more inclusive workforce will accelerate reconstruction, drive investment, foster social cohesion and motivate more Ukrainians to return from abroad.
Delivering a 3 Million Labour-Force Opportunity
delivering on Ukraine’s human-capital opportunity will require continued support from international partners to maintain momentum on existing efforts and prioritise the most impactful interventions. International partners can best support the government by aligning with its existing priorities and focusing on deliverable, short-term actions and rapid results. In practice, this means:
- Building on Ukraine’s world-leading technical skills and digital infrastructure to modernise parts of the employment ecosystem. With 46 per cent of unemployed people citing a lack of vacancies as a primary barrier to work and a further 26 per cent citing insufficient skills (these were the second and third most common answers behind low salaries), international partners can look to build on existing successes of Ukraine’s e-governance by funding the digitalisation of employment services.
Ukraine’s government has already embarked on this journey, designing an AI-driven matching platform for jobs and skills, and is looking for international support. The platform would not only facilitate better connections between jobseekers,employers and education providers but would also gather labour-market intelligence to support better policymaking in times of war and post-war recovery.
Foreign governments could share relevant experience related to the transformation of institutions such as the State Employment Service and State Labour Service,so that these bodies could deliver their services more efficiently without engaging employers anUkraine’s labour market faces significant hurdles,even as the nation navigates the ongoing conflict and pursues european Union membership. Addressing these challenges proactively is crucial for fostering a dynamic and inclusive workforce, and securing a resilient economic future.
Recent research indicates a ample pool of potential workers – over 3 million Ukrainians – are poised to contribute to the economy, provided appropriate policies and support systems are implemented. A key barrier identified is the difficulty women face balancing work and family responsibilities, cited by 67% of female respondents in a recent survey. This ranks as the second most significant obstacle,following concerns about fulfilling the physical demands of certain roles (69%). The Ukrainian government’s recent legislation guaranteeing free access to pre-school education is a positive step, but current childcare capacity remains insufficient to meet demand, particularly in many regions.Increased investment from international partners is needed to expand access, exploring innovative solutions like smaller, home-based daycare facilities and employer-supported childcare options. According to UNICEF, approximately 40% of Ukraine’s pre-war childcare facilities have been damaged or destroyed, exacerbating this issue.
To unlock Ukraine’s workforce potential, a dual focus on removing barriers to employment and investing in targeted reskilling initiatives is essential. Existing reskilling programs are already demonstrating positive outcomes, and scaling these efforts will be vital. Moreover, addressing the needs of internally displaced persons (IDPs) – estimated at over 3.7 million as of June 2024 by the UN Refugee Agency – is paramount. Many IDPs face unique challenges in re-entering the labour market,including lack of recognition of prior qualifications and limited access to information about available opportunities.
This analysis is based on extensive research conducted by the Tony Blair Institute (TBI), encompassing desk research, over 40 interviews with experts in Ukraine and internationally, comparative studies of European labour markets, and a comprehensive TBI-led Human Capital Survey. The survey,utilizing stratified random sampling across age groups,genders,and Ukrainian administrative regions,gathered insights from over 2,500 respondents – 1,200 unemployed,800 employed,and 500 economically inactive individuals.The survey aimed to pinpoint the obstacles hindering workforce participation and identify the support mechanisms Ukrainians require.
Findings from this research have been shared with Ukraine’s ministry of Economy and the government’s Employment Strategy working group, informing ongoing policy discussions. Ukraine cannot delay addressing these labour market issues while awaiting a resolution to the conflict. Bold and decisive action, coupled with strong international support, is needed now to build a more robust and inclusive economy capable of weathering current challenges and capitalizing on future opportunities.